FEDERAL COURT OF AUSTRALIA
Haycraft v AF1 Services Pty Ltd [2022] FCA 1441
File number: NSD 449 of 2022 Judgment of: STEWART J Date of judgment: 29 November 2022 Catchwords: PRACTICE AND PROCEDURE – application for stay of proceeding for just and equitable winding up of the first defendant and replacement of it as trustee of two trusts – where plaintiff and second defendant gave undertaking to bank that they would not take action to remove trustee of one of the trusts – whether undertaking given to bank was also given between the plaintiff and second defendant to each other – whether second defendant can enforce the undertaking – whether winding up would be breach of the undertaking Legislation: Corporations Act 2001 (Cth) s 461(1)(k)
Trustee Act 1925 (NSW) ss 70, 71
Cases cited: Bridging Capital Holdings Pty Ltd v Self Directed Super Funds Pty Ltd (Costs) [2022] FCA 361
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 22 Date of hearing: 29 November 2022 Counsel for the Plaintiff: S Meehan Solicitor for the Plaintiff: Harris Friedman Lawyers Counsel for the Second Defendant: D Neggo Solicitor for the Second Defendant: Macpherson Kelley ORDERS
NSD 449 of 2022 BETWEEN: PAUL LATHAM HAYCRAFT
Plaintiff
AND: AF1 SERVICES PTY LTD
First Defendant
CHRISTOPHER PEARSON
Second Defendant
ORDER MADE BY:
STEWART J
DATE OF ORDER:
29 NOVEMBER 2022
THE COURT ORDERS THAT:
1.The second defendant’s application to stay the proceeding (prayer 1 of his interlocutory application) be dismissed with costs.
And upon the undertakings, by the plaintiff’s solicitor, of:
A.the plaintiff not to resign or otherwise cause his removal as trustee of the Haycraft Family Trust without first providing the second defendant with 21 days’ notice; and
B.Pauline Haycraft not to exercise any rights as appointor of the Haycraft Family Trust without first providing the second defendant with 21 days’ notice,
THE COURT ORDERS THAT:
2.The second defendant’s application for security for costs (prayers 2-5 of his interlocutory application) be dismissed, the costs incidental to which be costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
STEWART J:
Introduction
The plaintiff, Mr Haycraft, applies for orders under s 461(1)(k) of the Corporations Act 2001 (Cth) to wind up the first defendant, AF1 Services Pty Ltd, on just and equitable grounds. Mr Haycraft also seeks consequential relief in respect of succession to AF1 Services’ personal equitable obligations as trustee of two trusts under ss 70 and 71 of the Trustee Act 1925 (NSW). The two directors of AF1 Services, and the two principals standing behind the corporation whose shares are owned equally by their respective family trusts, are Mr Haycraft and the second defendant, Mr Pearson. Mr Haycraft’s case is, in effect, that he and Mr Pearson have fallen out with the result that there is a…
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- Case
- [2022] FCA 1441
- Decision Date
CaseChat Overview and Summary
The central legal issue was whether the written undertaking given by Mr Haycraft and Mr Pearson to NAB on 2 July 2014 was also given between the two of them. If so, Mr Pearson argued that Mr Haycraft would be in breach of his obligations under the undertaking if the proceeding continued without NAB’s written consent. Mr Pearson submitted that the undertaking constituted not only a joint undertaking to NAB, but also an undertaking by Mr Haycraft and Mr Pearson to each other. He accordingly sought a stay of the proceeding until such time as NAB furnished the requisite written consent, to enforce his rights under the undertaking.
The court held that the undertaking was given to NAB only, and did not constitute an undertaking between Mr Haycraft and Mr Pearson. The court found that the undertaking was addressed to NAB, and did not contain any language that suggested it was intended to be binding between Mr Haycraft and Mr Pearson. The court further found that there was no evidence to suggest that the undertaking was intended to be binding between the two of them. Accordingly, the application for a stay was dismissed.
The second defendant’s application for security for costs was also dismissed, with the costs incidental to the application being costs in the cause. The court held that there were no exceptional circumstances that warranted the grant of security for costs.
Orders
Orders of the court
2. The second defendant’s application for security for costs (prayers 2-5 of his interlocutory application) be dismissed, the costs incidental to which be costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The plaintiff, Mr Haycraft, applies for orders under s 461(1)(k) of the Corporations Act 2001 (Cth) to wind up the first defendant, AF1 Services Pty Ltd, on just and equitable grounds. Mr Haycraft also seeks consequential relief in respect of succession to AF1 Services’ personal equitable obligations as trustee of two trusts under ss 70 and 71 of the Trustee Act 1925 (NSW). The two directors of AF1 Services, and the two principals standing behind the corporation whose shares are owned equally by their respective family trusts, are Mr Haycraft and the second defendant, Mr Pearson. Mr Haycraft’s case is, in effect, that he and Mr Pearson have fallen out with the result that there is a stalemate in the governance and conduct of the business of AF1 Services. AF1 Services is the trustee of two units trust, the AF1 Business Trust and the AF1 Property Trust. The former owns and operates a number of Nike stores in and around Sydney and the latter owns a number of residential properties, also in and around Sydney, and a quantity of gold and silver. The units in each of the trusts are held equally by each of Mr Haycraft and Mr Pearson’s family trusts. By interlocutory application, Mr Pearson seeks:(1)an order that the whole of the proceeding be stayed unless and until Mr Haycraft obtains written consent from National Australia Bank Ltd (NAB) to the removal and replacement of AF1 Services as trustee of the AF1 Property Trust, and provides a copy of that consent to Mr Pearson; and(2)an order for security for costs against Mr Haycraft, and other related orders. It is convenient to deal first with the application for a stay.The stay application Mr Pearson relies on a written undertaking by him and Mr Haycraft as trustees of their respective family trusts addressed to NAB dated 2 July 2014. The undertaking is in the following terms:We, PAUL HAYCRAFT and CHRIS PEARSON of [redacted], Mosman NSW 2088 being UNIT HOLDERS in the AF1 PROPERTY UNIT TRUST, do hereby:1.confirm that the Trust Deed dated 10/04/2014 has not been amended or altered in any way;a)undertake not to take any action or propose to take any action to terminate the AF1 PROPERTY UNIT TRUST without obtaining prior written consent from the National Australia Bank Limited;b)undertake not to take any action or propose to take any action to remove AF1 SERVICES PTY LTD as trustee for the AF1 PROPERTY UNIT TRUST without obtaining prior written consent from the National Australia Bank Limited. It is not in dispute that in bringing the proceeding Mr Haycraft has not obtained the prior consent of NAB notwithstanding that the effect of the proceeding, if successful, would be to remove AF1 Services as trustee of the AF1 Property Trust. That would be as a result of the winding up of AF1 Services which would then form the basis for the consequential orders for its replacement as trustee of both the business trust and the property trust. Mr Pearson submits that, properly construed, the undertaking constitutes not only a joint undertaking to NAB, but also an undertaking by Mr Haycraft and Mr Pearson to each other. He accordingly submits that if the proceeding were to continue without the written consent of NAB, Mr Haycraft would be in breach of his obligations under the undertaking to both NAB and Mr Pearson. That is the first basis upon which he seeks a stay of the proceeding until such time as NAB furnishes the requisite written consent, ie, to enforce his rights under the undertaking.